Mastercard: Classic cup and handle in payments giant

15 Nov 2019

Mastercard and Visa have been two of the workhorse names in this long-running bull market. Both have been classic “secular” growth names, riding the spread of digital payments across the globe. The trend has been strong but analysts don’t see it stopping any time soon.

They’re exactly the kind of firms highlighted in William O’Neil’s classic book How the Make Money in Stocks. He traded them by waiting for “cup and handle” formations that tend to appear on secular growth stocks. It’s a high basing pattern, with price holding most of its gains and forming a kind of basin near its old peaks.

The bottom of the basin is the cup. Then it makes a higher low on the right side, which O’Neil called the “handle.” MA and V made those key higher lows on November 5.

This sets MA up for continuation of its longer-term uptrend. More active traders may want to wait for a move above the November 4 high of $282.24 if they’re looking to buy calls. (MA and V both have heavy options activity, according to some of the analytics available on the TradeStation platform.)

While MA and V are very similar, our idea focuses on MA because its quarterly results were stronger last time around.